Craig James - the Australian economy - where 2 now?

Craig James – CBA Commsec's Economist Presented at the CBA Innovation Forum for SME’s on Monday 17 June 2013. A passionate speaker, with a sense of humour!  

The state of play 

• Business is currently quiet, and people are waiting for the election.
• Why the wait ?– the reality is that the government is run by bureaucrat’s, and  financial decisions (interest rates etc) by the reserve bank.
• Massive growth going to come from India and China – we are well placed. 
• Its not all about mining… services, education, tourism, health and infrastructure will continue to drive the economy.

Why are we glum?

•  Election
•  Bad perceived Political Leadership
• We are going through “stuff”  - changing from internet and mobile – changing way we shop – retailers are changing the way we are buying
•  High $ and Australia being expensive compared to rest of world – people are going overseas on holidays – tourism has been suffering
• People have not been lending/ borrowing as much – banking will possibly not be as profitable as in the past

In Australia we are doing ok

We are one of 11 countries with a AAA rating

5.5% unemployment

2.5% inflation

State of our State Economies

Strength of states compared by 8 indicators including retail/infrastructure/ Mining/agriculture

• Mining - WA/NT - growth
• Manufacturing/Finance/ Services - ACT NSW Vic - maintaining
• Agriculture – SA and Tasmania – going backwards 

What about NSW?

• NSW growing faster than in past 12 years
• Unemployment different in different parts
• Inner West 3.5
• Northwest 6%
• Centrals West 6%

Asset Classes in Australia

Property

Home process are doing ok. Sydney  and WA increasing by 4% against an average of 2%

Sharemarket

• Volume deceasing
• USA growing
• A$ profits increasing
•  Returns matter
•  Fully franked dividends – bode well for increase in shareemarket
• People and funds are sitting on a lot of cash , waiting for things to stabilize
• Interest rates low
• A$ - now 95c - expected to go to 85c

Forecast

• Aussie economy positioned well for growth on a number of levels
•  Confidence in economy will change from negative to positive (perception)
•  Agriculture – prime position to take place with
•  Growth will come from building our infrastructure
•  Increase in Services – growth of tourism and services – with a view to increased exports
• Growth of China and India – (on our doorstep) see Hans Rosling’s video on (a brilliant video of the rise of China and India). http://bsivc.blogspot.com.au/2013/06/hans-rowling-rise-of-india-and-chinas.html
• USA is coming off low base of the GFC – Ben Bernancke looking to stop the growth – will possibly increase interest rates, USA$ will increase –

The Numbers

Economy                  2- 3%

Inflation                    2- 3%

Unemployment         5- 6%

Res Property             2- 3%

Sharemarket              5,200

A$                             92 – 95c

Once the election is out of the road – nothing will be holding us back….. bottom line – we are bullish!!